-In the figure above, what happens if the Fed increases the quantity of money by 8 percent?
A) The LRMD curve shifts rightward to restore equilibrium.
B) The value of money falls to 0.92 and there is a movement downward along the LRMD.
C) The price level falls to 1.08.
D) The interest rate rises to 1.08.
E) The value of money rises to 1.08.

Question

-In the figure above, what happens if the Fed increases the quantity of money by 8 percent?
A) The LRMD curve shifts rightward to restore equilibrium. 
B) The value of money falls to 0.92 and there is a movement downward along the LRMD. 
C) The price level falls to 1.08. 
D) The interest rate rises to 1.08. 
E) The value of money rises to 1.08.

Quizplus · Accepted Answer

When the Fed increases the money supply, the value of money decreases, leading to a downward movement along the Long-Run Money Demand (LRMD) curve.

-In the Figure Above, What Happens If the Fed Increases